UBS beats on costs, misses on wealth

Investing.com -- UBS Group AG's (SIX:UBSG) second quarter of 2024 showcased a mixed performance. While the Investment Banking division delivered record results, fueled by strong equity and fixed income trading, other segments presented challenges.

The non-core unit exceeded expectations with significant reductions in risk-weighted assets and expenses, demonstrating progress in the bank's restructuring efforts.

However, the global wealth management division faced headwinds from higher advisor compensation costs, resulting in lower profits. Additionally, the Swiss banking unit's net interest income fell short of expectations due to slower deposit rate adjustments.

Despite these challenges, UBS's overall cost-cutting initiatives and asset management performance were well-received by analysts at Jefferies and RBC Capital Markets, who expressed optimism about the bank's trajectory for the remainder of the year. The bank's CET1 ratio remained strong, but Tangible Net Asset Value per share came in slightly below estimates.

“UBS is delivering faster on the factors it can control – cost savings and NCL run down – which should provide some buffer against regulatory headwinds and a potentially more challenging operating environment,” said analysts at RBC.

Looking ahead, UBS maintains a cautious outlook, citing potential headwinds from net interest income and ongoing restructuring costs. 

While the bank has increased its cost-saving target for the year, it also faces risks associated with the integration of Credit Suisse and potential economic uncertainties.

Ultimately, UBS's valuation is a complex interplay of its strong Investment Banking performance, the ongoing challenges in other divisions, and the successful execution of its strategic initiatives.